The big business of Marijuana, Inc.

Jason Levin, a young engineer who lives in Berkeley, is addressing a group of 30 angel investors gathered in a long conference room at Seattle’s stodgy Washington Athletic Club. Levin is hoping to persuade one or more of the people around the table to invest in the startup company he envisions, called Uptoke, in exchange for a stake in the company.

Levin and his team of engineers have produced prototypes of a high-tech, handheld portable vaporizer, he explains. Such devices heat cannabis (or tobacco or herbs) to the point where active chemicals are released without combustion of the plant material. His device has a built-in grinder; heats to 375° F in just 2.5 seconds, and requires no waiting between puffs. Power management tools automatically turn off the heating mechanism when the user isn’t inhaling, which means that both cannabis supply and batteries last longer. Levin sees a retail price point of around $300. A couple of investors nod approvingly.

In Fortune’s cover story, “Yes We Cannabis,” senior editor Roger Parloff takes us inside the sixth quarterly forum of the ArcView Angel Network. ArcView was formed in 2010 to bring together businessmen who believe that the prohibition era for marijuana in America is coming to an end and that a legitimate cannabis industry is now taking shape.

ArcView’s January event—to whose closed-door sessions Fortune was granted exclusive access—was taking place in a different world from its previous five. Everything changed last Nov. 6, when voters in Colorado and Washington approved, by 10-percentage-point margins, ballot initiatives that not only made it lawful for adults to use and possess up to an ounce of marijuana—for any purpose, not just medical—but also ordered state regulators to begin licensing commercial businesses to engage in for-profit cultivation and distribution of the drug, much as those regulators currently do with tobacco and alcohol.

“This is dramatically different from anything we’ve ever seen before,” says Steve DeAngelo, ArcView’s president and co-founder, and a marijuana activist for 40 years. “The reality on the ground now,” he says, “is you’re seeing the birth of a whole new industry.”